Property-casualty insurers are increasing information technology expenditures this year, with some spending to speed up legacy system replacement, a new study has found.
The results were contained in the second annual joint Information Technology (IT) spending survey released by Gartner Worldwide research firm and the Property Casualty Insurers Association of America (PCI) trade group.
Stamford, Conn.-based Gartner and Des Plains, Ill.-based PCI said that the spending on IT investments will better position insurers in the marketplace.
"This study is the most comprehensive IT expense statistics study in the property and casualty industry," said Scott Joyner, vice president, information technology, for PCI. "The 35 PCI member companies that participate in the study averaged $371 million in revenue and 434 employees."
The survey found that revenues for these companies increased by an average of 5.1 percent from 2005 to 2006, the announcement said.
In planning for 2007, these companies increased their IT spending plans by 11 percent over 2006 levels. IT expenses as a percentage of revenue–a measure of the importance of IT to the business–was 3 percent versus an industry average of 4.1 percent.
According to Stephen Forte, a principal research analyst with Gartner's Insurance Industry Advisory Service, the increased spending is going toward the aggressive replacement of costly legacy systems.
"In order to try to understand how this spending might impact the bottom line for these companies, the study also looked at the relationship between IT spending on management of claims and the overall expense of processing a claim," Mr. Forte explained.
"The next-generation claims management systems will reduce the total cost of processing claims, reduce the cycle time of end-to-end claims processing, and provide greater customer retention," he said.
Eric Stegman, a research director at Gartner who focuses on IT metrics and measurement, said: "Companies often neglect to measure the impact of IT investment on business processes such as claims management. Activities such as this make justifying IT investments easier and help improve the stature of the people who conduct them."
Gartner Inc. is an information technology research and advisory company.
PCI is composed of more than 1,000 member insurance companies.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.